voidable-contractsAlso known as negative easements, restrictive covenants can wreak havoc on the ability to develop property. Recently, in our real estate practice at Farrell Fritz, we have seen two alarming examples.

In both cases, the restrictive covenant combined with applying municipal zoning requirements precluded the development of the property. Fortunately, we had inserted language into the contracts that allowed the client to cancel the contract with no negative financial consequences.

Restrictive Covenants and Land Use Regulations

One such instance involved a waterfront parcel on Shinnecock Bay in the Town of Southampton. This property was subject to the Town’s wetland law, which regulates the setback of structures in relation to the location of the wetlands on site. Through a title search, we found out that the property was also burdened by a private covenant that also restricted the location of structures.

This covenant contained specific language which required that a structure constructed on the site be setback at least 85 feet from the street. From the opposite side of the property, the Town’s wetland regulations required that a principal structure be at least 125 feet from the wetlands.

Applying both the wetland setback and covenant setback resulted in a negative building envelope.

Since this covenant was included as part of the subdivision process, all 26 owners of lots in the subdivision had to sign off on a waiver of the covenant requirements.

Another similar circumstance occurred where a covenant in a deed for a lakefront property required that any structure constructed on the premises be situated 60 feet from the street. This property was also subject to the same 125-foot wetland setback as the previous example. Again, application of both setbacks rendered the lot unbuildable.

In this instance, the covenant was unusual. It only benefitted the sellers of the lot, who also owned other properties in the area. The sellers specifically retained the right to modify the restrictions imposed by the covenant.

If applied to their fullest extent, both restrictions result in a lot that cannot be developed.

Relief From Restrictive Covenants

Obviously, a property owner could apply for relief to the municipal agency having authority over wetland regulations. However, these municipal boards are under increasing pressure to preserve wetlands which protect water bodies, so relief from these restrictions is difficult to obtain. Extinguishment of the covenant is the only other option. There are three ways to extinguish a covenant:  (1) an agreement between the interested parties to the covenants; (2) a merger of ownership or (3) a final decision by a court of law.

All three paths are challenging.

To obtain an agreement to extinguish the covenant in my first example would require consent from the other 25 property owners in the subdivision.

Because of the vague nature of the language that created the covenant in the lakefront example, extinguishment involves a difficult title challenge. There, a prospective developer must research title ownership of the nearby properties to determine those owned by the persons that created the covenant. After that research, a perspective purchaser must then obtain an agreement of all current property owners in the chain of title of the affected properties to amend the covenant.

Second, to merge ownership would require the purchase of the properties that benefit from the covenant. A purchase of the necessary lots in both examples above would be cost prohibitive.

Finally, a party looking to extinguish a covenant can commence a litigation under §1500 of the Real Property Actions and Proceedings Law. There are too many causes of action under §1500 to list here; but extinguishing a well written covenant through the court system would be a difficult, time consuming, and expensive task.

The obvious advice here is to authorize a title company to provide any covenants and easements that could affect the development of a property under consideration for purchase prior to entering into contract of sale.

The orientation of a tennis court in a north/south direction is a benefit to competitive players interested in fair tennis play. Even the Appellate Division, Second Department, agrees.

To avoid the impact of sun glare, a Town of Southampton property owner sought several variances to construct a tennis court in a north/south direction. One of the variances requested a 17-foot setback from the street where 90 feet is required.  (Southampton Town Code, Section 330-11.)   This variance would allow the tennis court to be situated in a north/south direction and thus avoid the impact of sun glare that would occur if situated in an east/west direction.

StockSnap_8ODE0WIMD9A neighboring property owner, located across the street, appeared at the public hearing and opposed the requested variances.  In reaching its 2014 determination to grant the variance application, the Southampton Board of Zoning Appeals found that the proposed tennis court was located 158 feet away from the opposing neighbor’s house and therefore would not create a detriment to the property owner or the surrounding neighborhood.

The Board also relied upon no less than eight (8) mitigating factors, including:

  • Proposed landscape screening;
  • Sinking the court into the ground by four feet, thereby mitigating potential noise impacts;
  • The alternative of constructing a 9,000 square foot house was far more impactful;
  • The goal of distancing the court from the immediately contiguous neighbors was more important than any perceived impact to the opposing neighbor located across the street.

Unhappy with the Zoning Board’s determination, the opposing neighbor commenced an Article 78 proceeding in addition to seeking a TRO and preliminary injunctive relief.  After considering the arguments, by Decision and Order dated May 19, 2014, the trial court (J. Garguilo) upheld the Zoning Board’s decision, while at the same time vacating the TRO and denying petitioner’s request for preliminary injunctive relief.   Petitioner’s attempt to appeal the denial of injunctive relief was dismissed by the Appellate Division as the Second Department held that “appeal from the intermediate order in this proceeding must be dismissed because the right of direct appeal therefrom terminated with the entry of a judgment dated November 10, 2014.”  Id.

By further decision of even date, the Appellate Division upheld the Zoning Board determination, finding not only  “there was no evidence that the granting of the variance would produce an undesirable change in the character of the neighborhood, have an adverse effect on physical and environmental conditions, or otherwise result in a detriment to the health, safety, and welfare of the neighborhood or community . . . [but also] the Zoning Board rationally concluded that the benefit sought by [the applicant}, namely, to maximize its use of the proposed tennis court, could not be achieved by the alternative site proposed by the petitioner.”  Id.

The Appellate Division made the above determinations despite the fact that it found that the variances requested by the property owner were substantial in nature and that the difficulty was self-created. This decision is important to those seeking to uphold a favorable variance grant in the wake of neighboring opposition because this decision demonstrates that focusing on the absence of, or minimal, undesirable change in a neighborhood and detriment to the health, safety, and welfare of a community can trump substantial variance requests, including those that are self-created in nature.